Accounting Fundamentals: Trial Balances, Financial Statements Analysis

This document presents a comprehensive solution to an accounting fundamentals homework assignment. It covers the preparation of ledger accounts, trial balances, profit and loss statements, and balance sheets for various scenarios involving different companies and accounting periods. The assignment includes tasks such as recording transactions, preparing trial balances, and creating financial statements to assess the financial position of businesses. The solution demonstrates the application of accounting principles, including the classification of capital and revenue expenditures, and provides detailed workings and analyses to arrive at accurate financial results. The document showcases the step-by-step process of accounting, from initial transaction recording to the final preparation of financial statements, offering a practical guide to understanding and applying fundamental accounting concepts. Furthermore, the solution provides insights into the interpretation of financial data and its significance in evaluating a company's performance and financial health.

ACCOUNTING
FUNDAMENTALS

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
(a) Ledger accounts.....................................................................................................................1
(b) Trial balance –.......................................................................................................................3
(c) Statement of profit & loss and financial position statement ...............................................3
TASK 2............................................................................................................................................4
(a) Ledger Accounts....................................................................................................................4
(b) Trial Balance at 31 January...................................................................................................6
(c) Profit and loss statement -......................................................................................................7
TASK 3............................................................................................................................................9
(a) Ledgers accounts...................................................................................................................9
(b) Trial Balance at 31 January.................................................................................................11
(c) Statement of profit & loss and financial position................................................................11
TASK 4..........................................................................................................................................12
(a) Ledger accounts - ................................................................................................................12
(b) Trial balance at 27 June ......................................................................................................14
TASK 5..........................................................................................................................................15
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17

INTRODUCTION
Accounting is one of major element that are using in every organisation to keeping record
in systematic way. It is also using as a language to communicate with other business for know
profit and loss and financial position of the company (Niroomandi and et. Al 2012). It is not
apply directly for using it apply its fundamentals that are support to accounting formation. It is
totally depended on these fundamentals that are helping to face critical situations and solve it. In
this report covers different tasks that are related to different companies and prepare there trial
balances, ledger accounts and financial statement for know financial position. Identify difference
between capital expenditure and revenue expenditure according to international accounting
standards.
TASK 1
(a) Ledger accounts
Cash in hand a/c
Debit Credit
Date Particular Amount (£) Date Particular Amount (£)
April, 5 To Capital a/c 300 April, 7 By Purchase a/c 200
April, 8
To Loan from
Tatiana a/c 250 April, 15 By Motor van a/c 150
April, 20 To Sales a/c 350 April, 28 By Rent a/c 50
April, 29
By Loan from
Tatiana a/c 200
April, 30 By Drawings a/c 60
By closing balance
c/d 240
Total 900 Total 900
May, 1
To opening
balance b/d 240
Capital a/c
Debit Credit
Date Particular Amount (£) Date Particular Amount (£)
1

April, 30
To opening
balance b/d 300 April, 5 By Cash in hand a/c 300
May, 1
By Closing balance
c/d 300
Purchase a/c
Debit Credit
Date Particular Amount (£) Date Particular Amount (£)
April, 7
To Cash in hand
a/c 200 April, 30 By Trading a/c 200
Loan a/c
Debit Credit
Date Particular Amount (£) Date Particular Amount (£)
April, 29
To Cash in hand
a/c 200 April, 8
By Cash in hand
a/c 250
April, 30
To Closing
balance c/d 50
250 250
May, 1
By Opening
balance b/d 50
Motor Van a/c
Debit Credit
Date Particular Amount (£) Date Particular Amount (£)
April, 15
To Cash in
hand a/c 150 April, 30
By closing balance
c/d 150
May, 1
To opening
balance b/d 150
Rent a/c
Debit Credit
Date Particular Amount (£) Date Particular Amount (£)
2

April, 28
To cash in hand
a/c 50 April, 30
By profit & loss
statement 50
Sales a/c
Debit Credit
Date Particular Amount (£) Date Particular Amount (£)
April, 30 To Trading a/c 350 April, 20
By cash in hand
a/c 350
Drawings a/c
Debit Credit
Date Particular Amount (£) Date Particular Amount (£)
April, 30
To Cash in
hand a/c 60
(b) Trial balance –
It is a list of closing balance of ledgers accounts on a definite date and it is the first step to
prepare financial statements. Trial balance mainly prepared in the end of accounting period to
understand of financial statements in proper way. Ledger balances are categorised in debit and
credit balances (Mitra, 2016). According to accounting golden rules assets and expenses are
included in debit side and capital and incomes of the companies are showing in liabilities side in
trial balance. If all accounting transaction are recorded in systematic way and not spare any
transactions, after that it will recorded in accurately in ledgers so in trial balance debit side and
credit side will match. If any transaction remain and not find out that time open suspense account
to correct sum of trial balances both side.
List of accounts balances at April,30
Particulars Debit (£) Credit (£)
Cash in hand A/c 240
Capital a/c 300
Purchase a/c 200
Loan from Tatiana a/c 50
Motor van a/c 150
Rent a/c 50
Sales a/c 350
3

Drawings a/c 60
Total 700 700
(c) Statement of profit & loss and financial position statement
Working Note -
Cost of Sales = opening balance + Purchase + direct expenses – Closing stock
= 0 + 200 + 0 – 100
= 100
As per the above table it is prepare profit and loss statement for calculating net profit and loss
and after calculation getting that net profit is 200 and after that prepare balance sheet that is
showing final position of the company and there is in the end of financial year on April, 30 total
assets and total liabilities are equal that is 490.
4

TASK 2
(a) Ledger Accounts
Cash in hand a/c
Debit Credit
Date Particular Amount (£) Date Particular Amount (£)
Jan,1 To capital a/c 5000 Jan,2 By Motor Van a/c 600
Jan,4 To loan from Sergei 1000 Jan,3 By Purchase a/c 1300
Jan,13 To Sales a/c 300 Jan,10 By Motor Expenses a/c 200
Jan,20 To Sales a/c 500 Jan,24
By Storage expenses
a/c 150
Jan,27
By Loan from sergei
a/c 350
Jan,30 By Drawings a/c 175
Jan,31
By Closing balance
c/d 4025
6800 6800
To Opening balance
b/d 4025
Capital a/c
Debit Credit
Date Particular Amount (£) Date Particular Amount (£)
January,31
To closing balance
c/d 5000 January,31 By cash in hand a/c 5000
February,1 By opening balance c/d 5000
Motor Van a/c
Debit Credit
Date Particular Amount (£) Date Particular Amount (£)
Jan,2 To cash in hand a/c 600 Jan,31 By closing balance c/d 600
5

Feb, 1
To opening balance
b/d 600
Purchase a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan, 3 To cash in hand a/c 1300 Jan, 31 By closing balance c/d 1300
May, 1
To opening balance
b/d 1300
Loan from Sergei a/c
Debit Credit
Date Particular Amount (£) Date Particular Amount (£)
Jan, 27 To cash in hand a/c 350 Jan, 4 By cash in hand a/c 1000
Jan, 31
To closing balance
c/d 650
Total 1000 Total 1000
Feb, 1 By opening balance b/d 650
Motor Van expenses a/c
Debit Credit
Date Particular Amount (£) Date Particular Amount (£)
Jan, 10 To cash in hand a/c 200 Jan, 31 By Balance c/d 200
Feb, 1 To Balance b/d 200
Sales a/c
Debit Credit
Date Particular Amount (£) Date Particular Amount (£)
Jan, 31
To Closing balance
c/d 800 Jan, 13 By cash in hand a/c 300
Jan, 20 By cash a/c 500
800 800
6

Feb, 1 By closing balance b/d 800
Storage Expenses a/c
Debit Credit
Date Particular Amount (£) Date Particular Amount (£)
Jan, 24 To cash in hand a/c 150 Jan, 31 By closing balance c/d 150
Feb, 1
To opening balance
b/d 150
Drawings a/c
Debit Credit
Date Particular Amount (£) Date Particular Amount (£)
Jan, 30 To cash in hand a/c 175 Jan, 31 By closing balance c/d 175
Feb, 1
To opening balance
b/d 175
(b) Trial Balance at 31 January
Particulars Debit (£) Credit (£)
Cash a/c 4025
Capital a/c 5000
Motor van a/c 600
Purchase a/c 1300
Loan from sergei a/c 650
Motor van expenses a/c 200
Sales a/c 800
Storage expenses a/c 150
Drawings a/c 175
6450 6450
(c) Profit and loss statement -
It is one of the major statement that are included in financial statement and it will helping
to know financial position of the company with the help of net profit and net loss. Profit & Loss
7

statement summarises the income and expenses create by the company over the entire reporting
period (DeBerardinis and Chandel, 2016). It is also known as statements of operations, income
statement, statement of income and statement of earnings. For this statement using basic
equation is Revenues – Expenses = Profit
Every company prepare Profit & loss statement to know Net profit and net loss.
Revenues of the company are using for pay expenses, paid taxes to government and paid interest
to debt. After all adjustments result will come as net profit or net loss and it is adjusted from
capital. It is most important documents for keeping an eye on the financial health of a business.
Working Notes – Cost Of goods sales = opening balance + Purchase + direct expenses – Closing
inventories
= 0 + 1300 + 0 – 800
= 500
8

TASK 3
(a) Ledgers accounts
Sales a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan, 31 To Trading a/c 412 Jan, 2 By Harvey's a/c 124
Jan, 11 By Cash a/c 64
Jan, 21 By Cash a/c 110
Jan, 28 By Cash a/c 84
Jan, 31 By Cash a/c 30
9

412 412
Wages a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan, 5 To cash a/c 12 Jan, 31 Profit and loss a/c 58
Jan, 14 To cash a/c 14
Jan, 21 To cash a/c 17
Jan, 28 To cash a/c 15
58 58
Purchase a/c
Date Particular Amount (£) Date Particular Amount (£)
Jan, 5 To Rich's a/c 150 Jan, 31 By Trading a/c 225
Jan, 14 To cash a/c 75
10